Correlation Between ProFrac Holding and Halliburton

Can any of the company-specific risk be diversified away by investing in both ProFrac Holding and Halliburton at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining ProFrac Holding and Halliburton into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ProFrac Holding Corp and Halliburton, you can compare the effects of market volatilities on ProFrac Holding and Halliburton and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in ProFrac Holding with a short position of Halliburton. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProFrac Holding and Halliburton.

Diversification Opportunities for ProFrac Holding and Halliburton

0.82

Correlation Coefficient

ProFrac Holding  Halliburton

Very poor diversification

The 3 months correlation between ProFrac and Halliburton is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding ProFrac Holding Corp and Halliburton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halliburton and ProFrac Holding is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on ProFrac Holding Corp are associated (or correlated) with Halliburton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halliburton has no effect on the direction of ProFrac Holding i.e., ProFrac Holding and Halliburton go up and down completely randomly.

Pair Corralation between ProFrac Holding and Halliburton

Given the investment horizon of 90 days ProFrac Holding is expected to generate 1.28 times less return on investment than Halliburton. In addition to that, ProFrac Holding is 2.51 times more volatile than Halliburton. It trades about 0.04 of its total potential returns per unit of risk. Halliburton is currently generating about 0.14 per unit of volatility. If you would invest  3,426  in Halliburton on January 20, 2024 and sell it today you would earn a total of  439.00  from holding Halliburton or generate 12.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

ProFrac Holding Corp  vs.  Halliburton

ProFrac Holding Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProFrac Holding Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, ProFrac Holding may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Halliburton

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Halliburton are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Halliburton disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProFrac Holding and Halliburton

The main advantage of trading using opposite ProFrac Holding and Halliburton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProFrac Holding position performs unexpectedly, Halliburton can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Halliburton will offset losses from the drop in Halliburton's long position.

The idea behind ProFrac Holding Corp and Halliburton pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.